How Unreasonable is a $TWTR Takeover?

Shares of TWTR are higher again this morning. The takeover rumors have been circulating ever since the MSFT for LNKD deal was announced. Most people that I know scoff at Twitter when presented with the idea that someone might want to buy them. The general reaction is ‘why would anyone want to buy a money loser like Twitter?’

I can answer that question with another one.

Why do really rich people want to buy newspaper companies?

Answer: for power, influence and prestige.

Love or hate Twitter, it is the news super highway, the ultimate real time denizen for anything noteworthy happening in the world. Whenever a crisis hits, I go to Twitter to find real time information. As a resource, it’s invaluable, truly.

The valuation?

It’s actually not too bad.

The stock is trading a touch over 4x sales. Typically, growth stocks of note trade upwards of 10x.

As you can see, relative to its peer group, the stock is cheap. Note how LNKD got bought out at around 8x sales. Data provided by the indomitable Exodus. Give it a try.

The only other stock in social media that is more attractive than TWTR now, in my opinion, is YELP. But I’m biased and have loved Yelp from day 1.

I don’t think anyone would be surprised to see TWTR catch a bid for around $30-35 per share, given its potential. Just because the morons who operate it now can’t figure out how to monetize it doesn’t mean someone else won’t figure it out.